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    Advantages Versus Disadvantages of Checking Accounts

    RockyBy No Comments3 Mins Read
    Advantages. Disadvantages. Convenient—money available. Safer than carrying cash. Proof of payment. Easier budgeting. Cost of over-drafting account can be costly. Greater responsibility for record keeping. Minimum balance or fee requirements. Checking accounts, like savings accounts, are part of an individual’s personal money management system. Some checking account users will exclusively use electronic transactions. Checking accounts are very similar to savings accounts. Both types of accounts keep your money safe, and both are very easy to access if you need cash. The difference, however, is that checking accounts are designed to be used regularly and frequently, while savings accounts are intended to be for long-term money management. For example, financial institutions expect their customers to be making regular withdrawals and deposits from a checking account. These withdrawals can be made in person or they can be made with an ATM card, debit card, or checkbook. Most savings accounts earn interest. Checking accounts may or may not— checking-with-interest does exist at some financial institutions. Advantages and Disadvantages of a Checking Account. There are distinct advantages of opening a checking account, but there are also some disadvantages:

    Checking accounts are a banking tool that helps you manage your finances. There are different types of checking accounts to meet various needs. However, all these accounts operate in a similar method. The best free checking accounts are those without a minimum balance or maintenance fee. These depend on the bank.

    But before choosing the bank, you will have to weigh the advantages and disadvantages of checking accounts. Here is a quick look at these to help you choose.

    Advantages of Checking Accounts

    There are several advantages of checking accounts. They include:

    • Interest on Balance

    Interest may not be a given in every checking account. Some require that you have a minimum amount present to access the interest. The interest rate may not be much, but it is better than nothing.

    • Low Maintenance Costs

    These bank accounts may or may not have a maintenance cost. If there is a maintenance cost, it is usually low. If you do not incur an overdraft, you are safe. It may also not cost you anything to access your money from an ATM. Other banks will cover any ATM fees that occur.

    • No Need to Carry Cash

    Debit cards are traceable. So if someone steals your debit card, you can block it. However, cash is untraceable. You can get another debit card and continue with your daily transactions.

    • Keep a Record of Your Spending

    These accounts help you keep a record of your spending. It makes it easy to come up with a personal budget and stick to it. You can easily manage your spending.

    Disadvantages of Checking Accounts

    Read the fine print when opening a checking account. Otherwise, you will miss the disadvantages of these accounts. To help you along, here are a few.

    • Organizations Can Track Your Spending Habits

    Tracking your spending can be a disadvantage. Checking accounts create transactions that organizations can store and refer to in the future. Although they keep them with your permission, your spending habits can generate targeted advertising. 

    It may cause you to spend more money than your budget. So be careful which transactions you use your debit card. Sometimes, you can pay with cash.

    • Not Every Account Is Free

    Sometimes, there are costs when you are setting up your account. These costs may apply if you do not maintain your minimum balance. Sometimes, you may be careful and ensure you always keep the minimum balance. However, there may be other charges like new checks that may revert to your account.

    • Financial Institutions Can Block Your Access

    If a financial institution suspects that spending may not be yours, they can block the account. If it happens on a Friday, you will probably get access to your account on Monday. That may leave you without money to operate over the weekend.

    Conclusion

    Checking accounts are advantageous. At the same time, you need to be careful. They are not for everyone. Evaluate all the key points and the terms and conditions of the bank before starting your checking account.

    Sources:

    https://www.investopedia.com/ask/answers/040715/what-are-pros-and-cons-online-checking-accounts.asp

    https://www.forbes.com/advisor/banking/checking-vs-savings-accounts/

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